April 27, 2018 – Budget message from the President

To: Campus Community

From: President Gayle E. Hutchinson

Dear Campus Community,

Academic year 2017–18 has not been without adversity. As we proudly graduate 3,700 successful students in just a few weeks, we face significant ongoing challenges in meeting student, faculty, and staff needs. Despite these challenges, we continue to provide our students with a high-quality learning experience and make progress on student success, including our Graduation Initiative 2025 goals. We tackle all of these issues with support from one another while also realizing that the CSU and this campus is faced with financial exigency.

What financial challenges does the CSU face?

In the mid-1990s, the California State University received 80% of its budget from the state, with student tuition and fees making up the remaining 20%. This year, AY17–18, approximately 55% of the CSU budget was comprised of state funding, with student tuition and fees providing roughly 45% of the remainder.

In November, the CSU asked state lawmakers to increase the CSU budget by $283 million, including support for Graduation Initiative 2025. In January, the Governor’s proposed state budget included an increase to the CSU budget by only $92 million—$171 million less than what the CSU requires to address its costs.

Over the past four months, CSU students, faculty, staff, Board of Trustee members, the chancellor, administrators, and campus presidents have been lobbying legislators and the governor for adequate funding. On April 20, Chancellor Timothy White announced that he will not ask the CSU Board of Trustees to increase student tuition for the 2018-19 academic year; a decision he struggled to make. The Chancellor acknowledges that the state has the resources to fully fund the CSU budgetary requirements. He believes, as we do, that it is in the best interests of California and its citizens to try to maintain our current tuition, which is among one of the lowest in the nation. Doing so affirms and preserves the core tenants of a CSU education—affordability, quality, and access.

From mid-April until the Governor announces the final budget, the CSU community will intensify our efforts to persuade state lawmakers to make a greater investment in higher education. Collectively, we agree that the key to California’s success is sufficiently funding the CSU.

If the Governor and our lawmakers fail to deliver required funding to the CSU—the full $283 million we have requested—there will be significant consequences systemwide:

• Progress on Graduation Initiative 2025 will be slowed without the resources to offer more courses, hire faculty and advisors, and implement innovative student support programs.
• Without adequate resources, we cannot ensure authentic access for the nearly 500,000 students who enroll in the CSU next fall.
• Campuses will need to reevaluate programs and services.

What does this mean for Chico State?

Frankly, it will perpetuate an already challenging financial situation. The financial health of our campus has deteriorated as a result of years of deficit spending. Deficit spending happens when base “reoccurring” funding is not enough to cover current costs of instruction and campus operations. Deficit spending takes money from the University’s reserve accounts to fund the difference. The use of reserve money is considered “one time.” Reserve balances do not automatically replenish themselves—they are the direct result of long-term savings.

Funding recurring costs of programs and services with “one-time” dollars from reserve accounts is not a sustainable or responsible practice. When reserve balances are too low or depleted, the University’s ability to address unforeseen institutional challenges and emergencies is compromised. A healthy reserve balance is a savings of five months or more of institutional operating costs, and the CSU allows for up to six months. Today, Chico State has roughly three months of operating costs saved in its reserve accounts.

The practice of deficit spending from reserve accounts, which started years ago, was meant to be a short-term solution for budget challenges that emerged from the Great Recession (2007–2009) and an ongoing pattern of insufficient state appropriations.

Deficit spending at Chico State should not be news to our campus. What matters most now is what we do as a campus community to address our financial challenges, control our costs, and stop the practice of spending “one-time” money out of reserves at an alarming pace.

How much money are we talking about?

Deficit spending at Chico State amounts to roughly $6 million annually from “one-time” reserves. Further, if the Governor does not increase funding for the CSU, Chico State has responsibility to pay increased compensation and benefit costs totaling approximately $2.2 million. If we do nothing, this would increase our deficit spending from $6 million to roughly $8.2 million. We will continue to drain our reserves and further damage our financial health.

What have we done to begin addressing our financial challenges?

Cabinet has been working with me on these challenges as soon as they were identified in spring 2017. The following has been done to date:

• Newly hired vice presidents along with deans and directors have analyzed division, college, and program financial data to more fully understand student and programmatic needs as well as available funding sources, expenses, and deficits.
• Cabinet and the University Budget Committee together have reviewed relevant information about the deterioration of our institutional financial health.
• Vice presidents tasked their respective division leadership (deans and directors) with developing strategies to increase revenue streams on campus, e.g. program efficiencies, grants, contracts, philanthropy, increasing the number of international and out-of-state students.
• The President, Provost, and Vice President for Student Affairs proposed increases in three campus-based mandatory fees: Health Services Fee, Athletics Fee, and the Student Learning Fee, in order to address anticipated deficit spending in these areas. My decision is forthcoming on May 3.
• In addition to its efforts to increase philanthropic giving through partnerships with individuals, corporations, and foundations, University Advancement has made remarkable progress during the leadership phase of our capital campaign, Transform Tomorrow | The Campaign for Chico State. The funds raised to date have and will continue to generate private support to support real-world opportunities for our students, faculty, and staff; help renovate our educational labs and facilities; and establish new endowments for scholarships, faculty fellowships and high-impact programs. While these generous contributions from our University supporters will help offset reductions in state funding and ensure a level of quality that state funding alone cannot offer, they cannot replace it entirely.
• Further, vice presidents have directed division leadership to develop short- and long-term plans to reduce deficit spending and curb operational costs.

However, the measures taken to date are not enough to reduce deficit spending on campus by any significance. During fiscal year 2018-19, we will need to reduce our overall spending further while working together to develop a three- to five-year plan to bring deficit spending under control and begin replenishing low campus reserves.

What is our immediate plan of action?

As I mentioned in the State of the University address, setting strategic priorities with an eye toward the future will help us renew our mission focus and prioritize our responsibilities so that we make the best use of limited and precious resources.

Step I: Engage in strategic planning

Engaging in strategic planning and establishing University priorities will be challenging and require objective cooperation from all of us. Our actions will be grounded in reliable evidence and data as we examine our options and make informed decisions. The WASC institutional report, the 2016 and 2018 Climate Surveys, and my 2017 Listening Tour Report will provide important information to consider as well.

As we plan for the future, we will continue to achieve academic excellence while becoming more fiscally prudent. A campuswide strategic planning process is nearly developed and will be implemented soon after faculty return for the fall semester.

Step II: Implement a lens of leanness

During this period of campus financial exigency, we strive to think outside the box to identify alternative revenue sources. Additionally, I ask all of us to work together and implement cost-saving measures in ways that:

• Continue to support student learning, core instruction, and the student experience;
• Maintain critical campus facilities, operations, and services;
• Sustain health, safety, and security of students and employees.

All new faculty and staff hires or faculty and staff replacement hires will require the approval of the division vice president and the President.

In the spirit of transparency, I have described the situation as I understand it, and I ask for your participation and cooperation in the difficult work ahead.

Together, we have the power to make our voices heard and impress upon the state the importance of fully funding the CSU. I urge each and every one of you to join me in championing the need for the state to award the CSU its requested funding increase of $283 million.

As Chancellor White affirmed, we all want students to have the clearest and most life-changing path to graduation. We all want high-quality degrees to meet the needs of the state’s economy and society—today’s and tomorrow’s. We want to eliminate achievement gaps, grow quality degree programs, and improve completion rates. We all want faculty and staff to be fairly compensated. These shared priorities are shared responsibilities for California. And it is our shared responsibility to lobby on behalf of our students, Chico State, and the CSU.

What can you do?

• Contact your state representatives. Help them understand that an investment in the CSU is a forward-thinking investment in our shared priorities and a prosperous future for California.
• Learn more: Visit the CSU’s Invest in the Future website
• Spread the word: Encourage everyone you know to join us in our advocacy efforts. The louder we can be, the better.

Thank you. Together, we will work for a better tomorrow and a stronger Chico State.

Sincerely,

Gayle E. Hutchinson
President